Report of the Supervisory Board
Let me start by introducing myself as the new Chairman of the Supervisory Board. My name is Dr. Werner Brandt, and I have been a member and the Chairman of the Supervisory Board of ProSiebenSat.1 Media AG since June 2014. I took over the office of Chairman at the end of the last Annual General Meeting from Mr. Johannes Huth, who resigned from the Supervisory Board at the same time.
The ProSiebenSat.1 Group has concluded a very successful 2014 financial year, during which it consistently implemented its growth strategy. In this process, we, as the Supervisory Board of the Company, have provided the Executive Board of ProSiebenSat.1 Media AG with extensive advice and support.
Once again in the 2014 financial year, the Supervisory Board of ProSiebenSat.1 Media AG performed the duties incumbent upon it under the law, the articles of incorporation, and its own rules of procedure, while also taking into consideration the recommendations of the German Corporate Governance Code.
Cooperation Between the Executive Board and the Supervisory Board
In the 2014 financial year, the Supervisory Board regularly advised the Executive Board on the management of the company in close, trusting cooperation, and carefully and continuously supervised its conduct of the business. It dealt in depth with the development of the Group’s operations and strategy.
To this end, the Supervisory Board was regularly, promptly and fully informed in detail — both during meetings of the Supervisory Board and outside them — about all issues relevant to the Company concerning strategy, planning, business performance, the risk situation, risk management and compliance. When business performance deviated from plans, the Executive Board explained and discussed the details with the Supervisory Board. The Supervisory Board was directly involved at an early stage in all decisions of fundamental importance to the Company.
The Supervisory Board meetings were characterized by intensive and open exchanges with the Executive Board. In addition, an integral part of the meetings is represented by “closed sessions”, in which the members of the Supervisory Board have the opportunity to meet without the Executive Board being present.
Where the law, the articles of incorporation, or the rules of procedure demanded the approval of the Supervisory Board or a committee for individual measures, we have debated these and passed a corresponding resolution. The Supervisory Board was consistently and comprehensively informed of all matters requiring its approval; and corresponding proposals for resolution of the Executive Board were submitted promptly for review. The plenary Supervisory Board was supported in this process by the competent committees in each case, and discussed plans pending a decision with the Executive Board.
In addition to its reports at the Supervisory Board meetings, the Executive Board informed us of the most important financial figures in written monthly reports and submitted the interim and annual financial statements to us. We were also informed immediately of particular events between meetings and outside the regular reporting and, where necessary, were asked to pass resolutions in writing in consultation with the Chairman of the Supervisory Board. In addition, the Chairman of the Supervisory Board maintained an ongoing and close personal dialog with the CEO of ProSiebenSat.1 Media AG.
On the basis of the reports of the Executive Board, the Supervisory Board was always thoroughly informed about the situation of the Company, was involved in pending decisions directly and at an early stage, and was thus able to perform its tasks in their entirety. There was therefore no need for the Supervisory Board to examine the Company’s books and other records within the meaning of Section 111(2) of the German Stock Corporation Act beyond the documentation provided to us in the course of the Executive Board’s reporting activities.
Focal Points of the Supervisory Board’s Advisory and Monitoring Activities
The plenary Supervisory Board and its committees also dealt in the 2014 financial year with the business and financial situation, the fundamental questions of corporate policy and strategy, the general personnel situation, and the specific investment plans. The focal points of its advisory and supervisory activities were formed here by the following topics:
- On January 21 and 29, 2014, the Supervisory Board approved by means of circular resolutions the conclusion of an agreement for the sale of advertising time by GroupM Germany GmbH and the repurchase of outstanding share options that had been granted to members of the Executive Board under the Long-Term Incentive Plan.
- In another circular resolution, the Presiding Committee issued its approval for a long-term program license agreement with NBC Universal on February 11, 2014.
- In a meeting of the Supervisory Board held by teleconference, the acquisition of all the shares in Aeria Games was approved on February 19, 2014. This acquisition expanded the existing games business of the ProSiebenSat.1 Group to new target groups: Aeria Games Europe GmbH is a publisher that specializes in online and mobile games.
- In another teleconference on February 25, 2014, the Supervisory Board approved the acquisition of a majority holding in the US production company Half Yard Productions by the Red Arrow Entertainment Group. Red Arrow is thus continuing its acquisition strategy in key English-language markets.
- At the financial statements meeting on March 13, 2014, the Supervisory Board approved the annual and consolidated financial statements as well as the management and consolidated management report, the corporate governance report and the declaration of compliance for the 2013 financial year. The Board additionally reviewed and concurred in the proposal of the Executive Board for the allocation of the profits. At this meeting, we also conducted the annual review of the Executive Board compensation and intensively discussed its appropriateness, and we received a detailed overview of the current performance of the Company. Following an in-depth discussion, the Supervisory Board approved the bonus payments for the 2013 financial year and the target agreements for Executive Board members for the 2014 financial year.
- In circular resolutions of March 23 and April 8, 2014, the Supervisory Board approved comprehensive refinancing of the credit facilities of ProSiebenSat.1 Media AG through the bond and banking market. This refinancing includes on the one hand an unsecured bond in the amount of EUR 600 million maturing in April 2021, and, on the other, an unsecured syndicated loan agreement for EUR 2.0 billion maturing in April 2019, which replaces the previous syndicated loan.
- Also in April, the Supervisory Board approved the acquisition of the rights in the “Utopia” TV format. This format involves a social experiment that has been developed by the successful TV producer John de Mol. First aired on February 23, 2015, it is being broadcast on SAT.1 under the title “Newtopia”. In addition, the Presiding Committee approved by circular resolution an extension of the master license agreement with CBS Studios International.
- On May 13, 2014, the Supervisory Board adopted the proposed resolutions for the agenda of the Annual General Meeting. This also was done in writing through a circular resolution. The Supervisory Board concurred in the nomination of the Audit and Financial Committee for the appointment of the auditor for the 2014 financial year. It also concurred in the proposals of the Presiding Committee to fill the vacancy on the plenary Supervisory Board.
- The Supervisory Board also used written circular resolutions in June 2014 to approve the conclusion of various contracts. These included in particular the conclusion of advertising sales contracts with Magna Global Mediaplus GmbH and Aegis Media GmbH & Co. KG as well as a distribution agreement with Unitymedia KabelBW GmbH on the continuation and expansion of the previous cooperation. Also in June 2014, the Presiding Committee issued its approval for the agreement of a license contract with Studiocanal Deutschland.
- The first ordinary meeting of the newly elected Supervisory Board was held after the Annual General Meeting on June 26, 2014. During this meeting, the members elected me, Dr. Werner Brandt, as Chairman and Philipp Freise as my Vice Chairman.
- In a two-day “Introduction Session” on July 31 and August 1, 2014, the Executive Board gave us an in-depth explanation of the various business units. This provided the Supervisory Board with a comprehensive overview of the diverse portfolio of the ProSiebenSat.1 Group.
- During the extraordinary session of the Supervisory Board on September 2 and 3, 2014, the Executive Board provided an in-depth explanation of the strategic orientation of the Company, and informed us of its thoughts on a conversion of ProSiebenSat.1 Media AG into a European Company (SE). In addition to strategic decisions, personnel topics and changes to the Executive Board also formed a focal point of this two-day meeting. Thus the Supervisory Board and the Compensation Committee discussed intensively the compensation structure for Executive Board members and top executives and approved the introduction of a medium-term incentive plan for members of the Executive Board and selected top executives. In addition, the Supervisory Board dealt with changes in the Executive Board. The Supervisory Board appointed Dr. Gunnar Wiedenfels as CFO, and accepted the resignation of the previous CFO Axel Salzmann with effect from March 31, 2015. Dr. Ralf Schremper was appointed to the Executive Board as Chief M&A and Strategy Officer with effect from April 1, 2015, with responsibility for the newly created “Investment & Strategy, Mergers & Acquisitions” department. Dr. Gunnar Wiedenfels’ and Dr. Ralf Schremper’s term of office run for three years. Furthermore, the Supervisory Board decided that Conrad Albert should take on responsibility for the Pay TV and Content Acquisition areas with effect from January 1, 2015, in addition to his previous responsibilities on the Executive Board. Finally, the Supervisory Board obtained up-to-date information on the potential resignation of Heidi Stopper as Chief Human Resources Officer, and decided — in such case — to assign the responsibility for the Human Resources Department to the CEO Thomas Ebeling. In addition, the Presiding and Nomination Committee approved during this session an extension of the cooperation agreement with Warner Bros.
- In a written circular resolution on September 18, 2014, the Supervisory Board agreed to the request of Heidi Stopper to leave the Company and to resign her Executive Board mandate with effect from the end of September 30, 2014.
- The ordinary meeting of the Supervisory Board on September 30, 2014, was held as a teleconference. A focal point here was the planned increased internationalization of the digital business. In addition, the Executive Board informed us of the current performance in the most important business areas.
- On November 27, 2014, the Board approved by a written circular resolution the conclusion of a distribution agreement between maxdome GmbH and Unitymedia KabelBW. This distribution agreement is an important step in consolidating the leading market position of the maxdome video-on-demand portal.
- At its last ordinary meeting of the financial year on December 8, 2014, the 2015 budgeting for the ProSiebenSat.1 Group was presented and explained in detail to the Supervisory Board. In addition, we approved the launch of a new digital distribution platform, DVB-T2. The previous standard platform DVB-T1 will be switched off nationwide in 2018. The Supervisory Board also approved the equity investment in a leading European venture capital fund. Moreover, we were informed in detail about the performance in the most important business areas and received a report on measures to guarantee IT security throughout the Group.
In 2014, the Supervisory Board held a total of four ordinary meetings attended in person, two further meetings in the form of a teleconference, and a two-day session. With the exception of Stefan Dziarski, all members of the Supervisory Board attended more than half of the meetings. For the individualized disclosure of attendance at the meetings, we refer to the Corporate Governance Report, which can be found on our website as well as in the Annual Report. Outside these meetings, the Supervisory Board also adopted twelve resolutions by means of written circulars.
Report on the Work of the Committees
The Supervisory Board of ProSiebenSat.1 Media AG has set up various committees, which support it in its work. To perform its work efficiently, the Board also made use of three committees in 2014: The Presiding and Nomination Committee, the Compensation Committee, and the Audit and Finance Committee. These committees have reported on their activities regularly and comprehensively to the Supervisory Board in its plenary sessions. Their key responsibilities are described below:
- The PRESIDING AND NOMINATION COMMITTEE coordinates the work of the Supervisory Board and prepares its meetings. It adopts resolutions on measures of particular operational and strategic significance. For example, in the 2014 financial year, the committee granted its approval for the license contracts with various studios described in more detail above.
This committee is additionally responsible for the duties of a nomination committed pursuant to the German Corporate Governance Code. It thus submitted to the plenary Supervisory Board suitable candidates for the Supervisory Board for it to nominate at the Annual General Meeting on June 26, 2014.
In 2014, the Presiding and Nomination Committee adopted seven circular resolutions; three meetings attended in person were also held.
- The COMPENSATION COMMITTEE prepares resolutions for plenary sessions of the Supervisory Board on personnel-related Executive Board issues. In the 2014 financial year, it dealt in particular with personnel changes on the Executive Board. Its duties also include the annual review of the compensation of the Executive Board members, which was most recently conducted by the full Supervisory Board during the strategy session on September 2 and 3, 2014.
In 2014, the Compensation Committee held five ordinary meetings attended in person. Four circular resolutions were passed.
- The AUDIT AND FINANCE COMMITTEE dealt once again in the 2014 financial year with its duties pursuant to Section 107(3) Sentence 2 of the German Stock Corporation Act and Item 5.3.2 of the German Corporate Governance Code to monitor the financial reporting process, the effectiveness of the internal control system, the risk management system, compliance and the internal audit system. In this connection, the adoption of a new IT security standard was subject to its approval.
The Audit and Financial Committee also prepared the resolutions of the Supervisory Board on the annual and consolidated financial statements and the agreements with the auditor. In addition to the award of the audit assignment to the auditor, these primarily included the definition of the focal points of the audit and the details of the fee agreement. It furthermore took suitable measures to verify and monitor the independence of the auditor. In addition, it prepared the proposal of the Supervisory Board to the Annual General Meeting on the election of the auditor and gave its recommendation on this to the Supervisory Board.
The Audit and Finance Committee met five times in 2014.
For the individualized disclosure of attendance at the meetings of the Supervisory Board committees, we refer to the Corporate Governance Report, which can be found on our website as well as in the Annual Report.
Audit of the Annual and Consolidated Accounts for the 2014 Financial Year
The annual and consolidated financial statements of ProSiebenSat.1 Media AG and the management and consolidated management reports for the 2014 financial year were audited in accordance with the regulations by the Munich office of KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), and were issued on March 6, 2015, with an unqualified audit opinion.
All documents relating to the financial statements and the KPMG audit reports were made available to the members of the Supervisory Board promptly and were reviewed extensively by us. These documents were discussed in detail, in the presence of the auditors, first within the Audit and Finance Committee and then at the meeting of the full Supervisory Board. In the process, the auditor reported on the material results of the audit. No weaknesses were identified in the internal control and risk management systems in relation to the reporting process. Nor were there any circumstances that could give cause for concern about the partiality of the auditors. In addition to the auditing services, the auditors performed other attestation services amounting to EUR 0.5 million (previous year: EUR 0.6 million) and other services amounting to EUR 0.7 million (previous year: EUR 0.6 million). Details of the services provided by the auditors and the level of compensation are presented in the notes to the consolidated financial statements.
The Supervisory Board noted with approval the results of the auditor’s examination of the annual financial statements and, after completing its own examination, also found there was no cause for objection on its part. The Supervisory Board approved the annual and consolidated financial statements prepared by the Executive Board and audited by the auditor, as well as the management reports for the parent company and the Group. The annual financial statements are thereby adopted. Finally, the Supervisory Board also reviewed the Executive Board’s proposal for the allocation of profits, and concurred in that proposal.
Conflicts of Interest
The members of the Supervisory Board are required to disclose possible conflicts of interest immediately to the Presiding Committee. In the 2014 financial year, the following conflicts of interest were indicated on account of individual members of the Supervisory Board simultaneously holding mandates on executive bodies at competitors and or business partners of ProSiebenSat.1 Media AG:
- Antoinette (Annet) P. Aris holds mandates on the supervisory boards of Thomas Cook PLC and Kabel Deutschland Holding AG. As a precaution, she therefore took her leave from the Supervisory Board meetings at ProSiebenSat.1 Media AG before any discussions that concerned the Travel and Distribution business area. She rejoined the meetings only after these discussions were completed or after resolutions were adopted.
- Philipp Freise is head of the “European Media Industry” department at Kohlberg Kravis Roberts (KKR). To avoid any conflicts of interest, he was not involved in discussions about a possible cooperation of the ProSiebenSat.1 Group with another media company in the German-speaking area. In addition, he took his leave of the Supervisory Board meeting on December 8, 2014, as a precaution when the investment in a venture capital fund was on the agenda. He was also not involved in any resolutions adopted on these topics.
Beyond that, there have not been any indications of the existence of conflicts of interest.
The Executive Board and Supervisory Board have compiled a separate report on corporate governance. This and the Management Declaration pursuant to section 289a of the German Commercial Code can be found on our webpage and in the Annual Report.
Changes in the Composition of the Executive Board and Supervisory Board
The following changes occurred in the Executive Board in the 2014 financial year: Heidi Stopper resigned from her position on the Executive Board and her mandate as Chief Human Resources Officer of ProSiebenSat.1 Media AG with effect from the end of September 30, 2014, in agreement with the Supervisory Board. Axel Salzmann has also resigned from his position on the Executive Board and his function as CFO of the Company with effect from March 31, 2015, by mutual agreement. His successor is the previous Vice CFO Dr. Gunnar Wiedenfels. Furthermore, Dr. Ralf Schremper was appointed as Chief M&A and Strategy Officer as a further member of the Executive Board. The new members of the Executive Board have been appointed with effect from April 1, 2015; they have already worked for the company in executive positions for several years.
The composition of the Supervisory Board also changed in the 2014 financial year. The terms of office of the Supervisory Board members Johannes Huth, Dr. Jörg Rockenhäuser, Stefan Dziarski, Philipp Freise, Lord Clive Hollick, Götz Mäuser and Prof. Dr. Harald Wiedmann ended when the Annual General Meeting on June 26, 2014, closed. Gregory Dyke and Dr. Fred Th. J. Arp had previously resigned from their offices as members of the Supervisory Board with effect from the end of May 11, 2013, and October 19, 2013, respectively.
The Annual General Meeting on June 26, 2014, elected Lawrence Aidem, Antoinette (Annet) P. Aris, Dr. Werner Brandt, Adam Cahan, Dr. Marion Helmes and Erik Adrianus Hubertus Huggers as new members of the Supervisory Board. At the same time, Prof. Dr. Harald Wiedmann, Stefan Dziarski and Philipp Freise were re-elected to the Supervisory Board.
Stefan Dziarski resigned from his position as a member of the Supervisory Board with effect from the end of October 30, 2014.
Thank You from the Supervisory Board
On behalf of the Supervisory Board, I would like to explicitly thank the members of the Executive Board as well as all employees for their great commitment in the 2014 financial year. Their work has been the cornerstone for the success of the ProSiebenSat.1 Group in the 2014 financial year.
Special thanks go to the departing Executive Board members Axel Salzmann and Heidi Stopper. Axel Salzmann has set the agenda in important areas in the company and made a decisive contribution to ensuring that the company today stands on a stable financial base. I must thank Heidi Stopper for her commitment; through her forward-looking work in the field of human resources, she has raised the attractiveness of the ProSiebenSat.1 Group as an employer and supported the company’s growth strategy.
I would also like to thank the departing members of the Supervisory Board for their work on the ProSiebenSat.1 Supervisory Board, which has made the takeover of the business by the new Supervisory Board significantly easier. Last, but not least, I would like to express my thanks to you, our esteemed shareholders, for your confidence in the company and in the stock of ProSiebenSat.1 Media AG.
Unterföhring, March 2015
On behalf of the Supervisory Board
Dr. Werner Brandt, Chairman